COVID-19 impact: Consumer confidence at record low, RBI survey shows

Amidst a devastating wave of the COVID-19 pandemic and a dwindling economy, Indian consumer's confidence has slumped to a record low. The current situation index dropped to a record 48.5 in May 2021 from 53.1 in March 2021, according to the Reserve Bank of India's (RBI's) consumer confidence survey. Under the index, 100 is the level that divides optimism from pessimism.

The RBI has stated that the respondents of the survey were bleak about the year-ahead prospects. The future expectations index has dropped to 96.4 from 109.8 in the period the survey has reviewed.

"Household spending also weakened in the latest survey round," RBI noted in the survey. The central bank cited consumers' concern about the current economic situation in the country and job prospects. It added that even essential spending was "showing signs of moderation while non-essential spending continues to contract."

Low consumer confidence is bad news for any economy that is primarily driven by consumption. RBI's Households' Inflation Expectations Survey has pointed out that inflation expectations are firmly established.

Households' median inflation perception for the current period jumped by 150 basis points to 10.2% while the inflation expectation for three months rose by 70 basis points to 10.8%, compared to the March 2021 survey, the RBI said.

According to the central bank, median inflation expectations for the year ahead have also remained at a hiked level of 10.9 per cent.

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